It’s a miserable start to an election year when both sides of politics have already effectively ruled out doing anything substantial to help ease the transition from a reliance on commodities investment for economic growth. Such is the cost of worshipping the surplus god above all.

It might explain why a growing list of past and present Reserve Bank board members are telling Wayne Swan and Joe Hockey that their fiscal mantra is wrong, that stimulating the economy can’t just be left to the RBA.

Present RBA board members Heather Ridout and John Edwards and past members Warwick McKibbin, Bob Gregory and Bernie Fraser have been quoted in various places in recent days more or less recommending that the federal government seize the opportunity to borrow at low rates to invest in civil infrastructure. They’ve effectively demonstrated how ideologically hidebound our big-picture politics have become, strapped to the surplus mast.

The RBA types are flying in the face of the orthodoxy presented by Treasury Secretary Martin Parkinson, presenting the government’s line, and the Abbott/Hockey show over the weekend.

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Labor and the Coalition wedging each other over the political prize of some sort of surplus means both sides are precluding the suggested infrastructure stimulus. The impact of this bi-partisan positioning is to leave responsibility for economic growth rate to the RBA and its single blunt instrument.

That’s fine when the economy is motoring along without any particular challenge, but it has severe limitations when the road gets rough. Swan and Hockey are both promising the government will keep its foot on the economic brake despite the RBA’s foot on the accelerator not having much effect.

The last time there was such a disconnect between monetary and fiscal policy was in the final term of the Howard/Costello government continuing in the first Rudd/Swan budget. Then it was the RBA hitting the brakes while the treasurers of the day piled on the fuel of tax cuts, middle-class welfare, sundry handouts and whatever else they could think of to buy votes. The result was the nation hurtling towards a hard RBA-induced landing, only “saved” by the GFC.

The RBA board members of course are speaking as individuals and don’t claim to represent the official RBA view – it’s not the RBA’s remit to tell the government how to do its job, at least not publicly – but you have to begin to wonder when so many people with experience of monetary and fiscal interaction feel the need to speak out. And the public sector’s negative impact on demand has become a regular mention in the board minutes and speeches by the mandarins.

What makes this rather important split between RBA board member thinking and the policy of Labor and Liberal parties worse is that we’re in for several months of politicians raising conflicting expectations in the electorate without being able to deliver anything that really counts to maintain growth over the next term.

Fiscal rectitude – getting back to surplus – remains the bi-partisan given. Add the escalating political promises and there’s no room for what the RBA board members are suggesting.

That was reinforced over the weekend in the latest chapter of what will have been a three-year election saga. Despite the sloth that should be observed over the Australian Day long weekend, natural disaster victims and emergency workers excepted, Tony Abbott chose Sunday to officially launch more of the same. This promises to be a very long year in politics.

Not surprisingly, there was nothing much in Sunday’s show - the usual cut and abolish taxes, boost productivity, enhance border security, increase defence spending and make paid parental leave much more generous. And spare me rhetoric about cutting red tape and lifting productivity – they all say that and neither can be easily achieved.

That was followed on Monday by shadow treasurer Joe Hockey reaffirming allegiance to the surplus. “Our commitment is emphatic,” Hockey told ABC radio. “Based on the numbers published today we will deliver a surplus in our first year and every year after that.”

No, it doesn’t add up, just as Labor’s announced fiscal aspirations don’t mesh with implementing the NDIS and Gonski reforms. There’s stuff neither side is telling us. Or they’re lying. Or they really don’t know. And there’s always option D: all of the above.

Swan at least says the government will think about how infrastructure might be funded. Hockey is still talking about waste of the last war, Pink Batts and all that.

Adding to the problem is that we’re set for another crescendo of politicians telling voters that their lives are uniformly miserable, that they deserve so much more from government and that the right vote will make everything wonderful again, just like it was in the good old days. It really isn’t that simple.

“The good old days” were when Kevin Rudd bored into people that “working families are doing it tough” as a means of defeating John Howard when the facts were that working families had never had it so good. There was no shortage of work for said families, the shortage of labour pushing up wages, the economy unsustainably bubbling on the commodities price windfall, surging debt and asset prices. The 2007 campaign might come to be seen as one of our more inane and venal – an unhealthy auction with each bid met with a “me too” from the other party, the culmination of several years of boom blown.

There are a couple of hundred thousand Australians who are worse off now than they were when Rudd was elected in November 2007 – the unemployment rate that month was 4.4 per cent and now it’s 5.4 per cent. Real estate prices aren’t soaring any more (it was a bad thing that they did) and business now is much more competitive at all levels – profits aren’t as easy to come by. Structural change, global crises and the strong dollar are all extremely challenging.

On the other hand, there are more than a million extra Australians in work, those workers and old age pensioners have seen their real disposable income rise (though many won’t believe it), property prices have stabilised and seem likely to modestly firm, the stock market is on the rise again and the world seems to be managing (though not solving) its various crises.

Keeping perspective about our economy can’t be easy – otherwise so many people wouldn’t lose it. By election day, perspective no doubt will be rarer again. Many people will be convinced that one party or the other will make their lives much better – when neither party is offering to do the basic minimum of working with the RBA instead of against in meeting the main economic challenge of the next federal term.

Michael Pascoe is a BusinessDay contributing editor.

52 comments so far

Wages are way too high. No point borrowing low to build infrastructure when we get such lousy value for money. The desalination plant is an example of how costly it is to build anything these days. What's worse is that the government wants to coerce business to buy Australian made products for projects. It is madness. We need to reset the economy at lower levels than we currently have to endure. The restaurant industry is the first to buckle under the weight of silly wages. The flood gates will open soon as businesses make the decision to opt out of 'Fairwork' and try to survive.We all know that wages are at unaffordable levels and only the monopolies & subsidised sectors can afford to pay them.

Commenter

Brisbane Bear

Location

Brisbane

Date and time

January 29, 2013, 8:28AM

4 weeks to go before doomsday BB

Commenter

Econorat

Location

Sydney

Date and time

January 29, 2013, 10:17AM

We are in the window Econcrat. Next 2 months will be brutal. One of my competitors just bit the dust last week. Wettenhalls transport went under. 500 jobs lost. So unnecessary.

Commenter

Brisbane Bear

Location

Brisbane

Date and time

January 29, 2013, 10:26AM

What Rubbish. I guess you want the workforce at significantly lower wages so that the Senior inept management get highly paid. Realistically wages are low in Australia comared to elsewhere, and Business is the first to complain. Look at the Resource company's involvement with Geology or Engineering course, their history is woeful. An engineer can treble their salary going offshore a sparky working in Saud will get paid 800k and you complain wages are to high. Stop dreaming and get your business in order. Smart companies pay good wages to attract good people, dumb companies complain about wages

Commenter

Lindsay

Location

Sydney

Date and time

January 29, 2013, 10:29AM

You only have to look at the retail industry to seek that Business has been extremely slow to change to address changing paradigms. Change does not just mean wages it means the whole business model starting at creativity and innovation and R&D. Both areas where Australian business is far too often caught short.

Commenter

Seriously

Location

Date and time

January 29, 2013, 10:43AM

Dumb companies ask for free money from the government. The car makers are enjoying record sales , yet we continue to give these multinationals millions of dollars in subsidies. When if ever do these companies have to learn to compete like the rest of us? Wages are too high right across the board from CEO'S to politicians, to public servants, to everyone. The system is broken and it will be evident to everyone this year. The numbers don't add up and many, many business models are broken. I notice a few commentators are starting to twig. Switzer said wages are the elephant in the room. I have been saying this for two years. It is what we can afford, not what we would like. Anyway argue with the market, it will determine what is affordable.

Commenter

Brisbane Bear

Location

Brisbane

Date and time

January 29, 2013, 10:45AM

now Brisbane Bear is running a rolling two month window for his doomsday. But at least in picking on restaurants BBear shows his total lack of worldliness. Why don't you live in the US for a while where "the help" expects 18% of the takings (as tips paid directly from the diner's pocket) plus wages. So come on Bear when is your absoloute latest deadline for the disaster of which you speak?

Commenter

colin

Location

melbourne

Date and time

January 29, 2013, 10:56AM

here is the thoughts of one of my American friends. Most of my American friends can't believe what they see in Australia. They know we are headed for an economic disaster.

yep a 0.3% drop in new housing approvals and the bubble has burst. before you get too wrapped in it all BBear, be sure that Mr "Shedloack" actually exists, and I doubt he is a friend.

Commenter

colin

Location

melbourne

Date and time

January 29, 2013, 12:54PM

Brisbane bear represents many so-called modern employers: those who will always blame the cost (and subtly, attitude) of employees when anything goes wrong. And of course, in business things are always going wrong.Corporate and government Australia seems to be relying on a culture of fear and loathing between employer and employee which I thought we had overcome 25 years ago. We once had the Accord which stimulated trust between them, which employers now scorn - even though it worked.Like it or not, BB, your business's future wil be largely dependent upon quality staff, who in turn rely on you for their future. It's a compact - but it stats with your attitude, not theirs.I suspect your business is in trouble, and I'm sure it pains you, but no-one asked to to go into business; no-one asked you to employ people. If you hire people, you have to take responsibility, something more and more employers (and state governments) seem not to be doing.Fear and loathing has never been the basis for a positive workable employer/employee relationship - or for making a profit. If you think it somehow does now, you're living in fantasy land. People are not business units - they are people with families, mortgages, children, who will generally work hard for someone they respect.